With US Sanctions Looming, Nicaragua’s Economy Posed for Difficult 2018

It could be a long 2018 for Nicaragua and President Daniel Ortega. The country’s economy may slow down significantly should the United States decide to issue sanctions, and internal financial problems threaten its stability as well.

Nicaragua grew in recent years by as much as five percentage points, but the threat of sanctions from the US government have already begun to make a difference for the worst, as 2017 closed with an economic growth of only 4.5 percent, according to the economist Néstor Avendaño.

The Central Bank of Nicaragua originally estimated that the country would grow between 4.7 percent and 5.2 percent, but 2017 closed lower than expected.

Meanwhile, the Nica Act —a law that would implement economic sanctions against Daniel Ortega’s regime — continues to move through the US Congress. The legislation intends to punish individuals with links to corruption or who are suspected of violating human rights.

That makes 2018 a complex year full of serious economic obstacles, especially with uncertain investors who may not be willing to put money into the private sector.

“When there is distrust in an economy, a large part of the flow of foreign investment is paralyzed,” Coordinator for the Economic Commission of Nicaragua Adolfo Acevedo. “It’s very risky to say at this moment, but I think there may be a lack of investment that will generate less economic growth, more unemployment, and more uncertainty. Remember that in times of crisis, both investors and consumers save, leading to a decline in domestic consumption and purchasing.”

Nicaragua continues to lose its strongest investors due to the authoritarianism of Daniel Ortega’s regime, as well as the scandals that the Donald Trump administration has brought to light regarding commercial ties with Venezuela. It’s set a bad precedent ahead of a vote for the Nica Acta, which could cause foreign and domestic capital to shift into other territories.